On June 1, 2012, the Department of Health and Human Services Office of Inspector General (the “OIG”) issued Advisory Opinion No. 12-06, warning that two proposed arrangements between an anesthesiology practice (the “practice”) and one or more physician-owned ambulatory surgical centers (the “ASCs”) could potentially violate the Anti-kickback Statute (the “AKS”). The anesthesiology practice requested the Advisory Opinion because it is purportedly under pressure to enter into one of the proposed arrangements by several ASCs for which it is the exclusive provider of anesthesia services in order to retain such business relationships.

The OIG began the Advisory Opinion by outlining the two proposed arrangements. In proposed arrangement “A”, the practice would remain the exclusive provider of anesthesia services to the ASCs, and continue to bill and collect for such services, but would pay the ASCs a per-patient “management services fee” to compensate the ASCs for a variety of administrative services. However, such fees would not be charged with respect to Federal health care program patients.

In proposed arrangement “B”, the ASC ownership entities would form subsidiaries that would become the exclusive providers of anesthesia services to the ASCs. The subsidiaries would, in turn, engage the practice on an independent contractor basis to provide all of the necessary anesthesia-related services. The subsidiaries would bill and collect for such services and pay the practice a fixed amount pursuant to the terms of their agreement. Any profits resulting from such arrangement would be retained by the subsidiaries and ultimately distributed to the physician-owners of the ASCs.

The OIG separately analyzed both proposed arrangements, finding that both presented a material risk of violating the AKS. First, with respect to proposed arrangement “A”, the OIG stated that simply “carving out” Federal health care program patients does not insulate the arrangement from potential AKS liability because “[s]uch arrangements implicate, and may violate, the anti-kickback statute by disguising remuneration for Federal health care program business through the payment of amounts purportedly related to non-Federal health care program business.” The OIG noted that because the practice would remain the exclusive provider of anesthesia services to the ASCs under this arrangement, the “carve out” would not reduce the risk that the proposed management services fees would be paid to induce referrals of Federally insured patients.

The OIG further stated with respect to proposed arrangement “A” that the management services fees would effectively cause the ASCs to be paid twice for the same services. The OIG noted that the facility fees paid to ASCs by the Medicare program include reimbursement for the types of services for which the ASCs are seeking reimbursement from the practice through the management services fees. Thus, the OIG concluded, the proposed fees could be interpreted as an inducement for the ASCs to refer all of their patients to the practice, including Federally insured patients.

With respect to proposed arrangement “B”, the OIG stated that the subsidiaries’ income under the proposed arrangement would not be protected by the ASC safe harbor because such protection only extends to the provision of surgical services, not anesthesia services. Moreover, the income distributed to the ASCs’ physician-owners would not be protected under either the employment safe harbor or the personal services and management contracts safe harbor.

Lacking safe harbor protection, the OIG stated that proposed arrangement “B” would present more than a minimal risk of fraud and abuse because it would essentially constitute an expansion by the ASCs’ physician-owners into a new line of business that would be wholly dependent upon the ASCs’ referrals, with all of the anesthesia subsidiaries’ operations essentially contracted out to the practice. According to the OIG, such an arrangement was the subject of a Special Advisory Bulletin issued in 2003 [see 68 Fed. Reg. at 23,148]. The OIG concluded that proposed arrangement “B” is simply designed to permit the ASCs’ physician owners to be compensated for their referrals to the practice by indirectly retaining a portion of the practice’s anesthesia services revenue.

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